Module 4: Ecological economics
Meaning: a new paradigm
Transdisciplinarity
Fundaments: limits to physical growth, ignorance and precautionary principle, multicriteria
analysis
Module 4: From neoclassical economics to environmental economics….
Externalities
(mkt failure)
“forcing” externalities into
the mkt (pricing them)
Cost-Benefit Analysis
Clear product
Environmental
taxes...
$
market
Unclear process
“Let them eat
pollution”
Total Economic Value
CV, TC, Hedonic pricing...
Many people believe that the conceptual foundations of conventional economics analysis are erroneous
and that we now need a new economics –an ecological economics (Diesendorf and Hamilton)
...to ecological economics: a new paradigm
View point of neoclassical economics
View point of ecological economics
Strong comparability of values
Weak comparability of values
implies
Strong commensurability
or weak commensurability
Incommensurability
applies
Monocriterion evaluation
Multicriteria evaluation
“The best solution”
“A best solution”
Weak sustainability
Strong sustainability
Differences in emphasis between EE and ERE
View point of neoclassical economics
View point of ecological economics
Optimal allocation of externalities
Priority to efficiency
Optimal welfare or Pareto efficiency
Sustainable growth in abstract models
Growth optimism and “win-win” options
Deterministic optimisation of
intertemporal welfare
Shotr to meium-term focus
Partial, monodisciplinary and analytical
Abstract and general
Monetary indicators
External costs and economic valuation
CBA
Applied general equilibrim models with
external costs
Max of utility or profit
Global market and isolated individuals
Utilitarianism and functionalism
Optimal scale
Priority to sustainability
Needs fulfilled and equitable distribution
Sustainable dvpm, globally and North/South
Growth pessimis and difficult choices
Unpredictable co-evolution
Long-term focus
Complete, integrtive and descriptive
Concrete and specific
Physical and bioogical indicators
Systems analysis
Multidimensional evaluation
Integrated models with cause-effect relationships
Bounded individual rationality and uncertainty
Local communities
Environmentla ethics
from van de Bergh: “Ecological economics: themes, approaches and differences with environmental
economics”
Fundaments and issues
•Based on open system economics within a closed system: limits to physical growth
•The precautionary principle: "The recognition that in the analysis of complex
systems like the earth at all space and time scales, fundamental uncertainty is large
and irreducible and certain processes are irreversible, requir[es] a fundamentally
precautionary stance." (Getting Down to Earth, p.2)
“If we matter and then it doesn´t matter, it doesn´t matter; if we don’t matter, and
then it matters, it matters” (Human Ecology, Human Economy)
•Future generations: how to discount the future?
>i  < future value of the environment  > resource use (and pollution)
today
implications on irreversibility and uncertainty/ignorance (precaution)
•Exercise on nuclear energy waste
•Multicriteria analysis in decision making
(example: weighted goal programming; NAIADE)
Readings
Barbier, E.: “Environmental valuation in developing countries” in Yearbook of environmental and resource
economics
Dieendorf and Hamilton (eds.): “Foundations of ecological economics” (chapter 2) + “The
precautionary principle” (in chapter 3 of the book)
Edward Jones, Davies, Hussain: Ecological Economics, an introduction. See “The ecological approah to
environmental evaluation (Chapter 7)
Giampietro, Mario. 2002: The Precautionary Principle and Ecological Hazards of Genetically
Modified Organisms. AMBIO: A Journal of the Human Environment: Vol. 31, No. 6, pp. 466–470
Hanley, N.: “Cost-benefit analysis of envronmental policy and management” in van de Bergh, ch. 57
Janssen and Munda: “Multi-criteria methids for quantitative, qualitative and fuzzy evaluation problems” in
van de Bergh, chapter 58.
Martinez-Alier, Munda and O’Neill: Weak comparability of values as a foundation of ecological
economics. Ecological economics (electonic journal) issue 26, pag 277-286
Munda, G.: Conceptualising and responding to complexity.
Munda, G.: Environmental Economics, Ecological Economics and the Concept of Sustainable
Development
The Economist, February 8th, 1992: “Let them eat pollution” pag.82
Spash, C.: “The development of environmental thinking in economics”
Van de Bergh, J.: “Ecological economics: themes, approaches and differences with environmental
economics” Regional Environmental Change, 2001, vol.2 (1): 13-23